Mexico

Overview

Mexico is the 11th largest economy by purchasing power parity and 15th largest by nominal GDP. More than 90% of exports are conducted under free trade agreements (FTAs) with more than 40 countries including the US, China, Japan, and the European Union. The country’s export trading mainly revolves around oil, silver, vegetables, cotton, coffee, fruits, and has recently emerged as a major manufacturing hub for auto parts and electronics. Prudent monetary policies, sensible fiscal policy, and structural reforms have improved Mexico’s macroeconomic performance and bolstered the economy.

Currency: Mexican Peso

Principal language: Spanish

Government: Federal Republic

Capital City: Mexico City

Major Cities: Guadalajara, Monterrey, Puebla, León

Employment Contracts

Employers are required to provide employment contracts to all the employees. Though the contracts can be written in Spanish and another language, those in Spanish are used in case conflicts arise. Employment contracts must contain:

  • Name, nationality, gender, marital status, and address of the worker and employer
  • Job description
  • Duration of the employment contract, in the case of fixed-term contracts
  • Worksite (s) where employees will work
  • Remuneration and mode of payment
  • Daily hours of work
  • Rest days, holidays, annual leave, and other conditions agreed to by workers and the employer
  • Training and development programs that employees may undergo for enhancing performance.

Revisions to the 2012 Federal Labor Law added three concepts: trial periods, initial training periods, and seasonal work which employers can consider when hiring new employees.

Trial Period
Employment for a defined term of more than 180 days or an indefinite term can now include a trial period. Employees must agree to the trial period that must be specified in the written employment contracts.

Initial Training Period
Employers can now use an initial training period to help acclimatize new employees and acquire the knowledge and skills required to perform a particular job. Employees must agree to this period specified in the employment contract. Initial training period must not exceed three months in general.

Seasonal Work
Employment for an indefinite term can now include discontinuous work in cases where the services are required for fixed periods, or seasons and not throughout the week, month, or year. This arrangement allows suspension of the employment contract during off-seasons.

Work/Time Regulations

Under the Federal Labor Law, a normal workday must not exceed 8 hours, and a standard workweek must not exceed 48 hours. A 30-minute rest period must be provided during a work shift. Employees must also be given 1 day off in a week with full pay. Most employers choose a 40-hour workweek.

The Federal Labor Law recognizes three work shifts:

  • The day shift of 8 hours, between 6 a.m. and 8 p.m.
  • The night shift of 7 hours, between 8 p.m. and 6 a.m.
  • The swing or “mixed” shift of 7.5 hours, divided between the day and night shifts

A swing shift is considered a night shift if more than 3.5 hours of work is performed between 8 p.m. and 6 a.m.

Overtime
Overtime is limited to 3 hours per day and must not be more than 3 consecutive days. Workers are paid twice their regular hourly wage for the first 9 hours of overtime per week.

Workers under 16 years of age cannot engage in overtime work. Employees who work on Sunday receive their regular wages and also an additional 25%. Employees required to work on their rest day are paid thrice their wages for that day.

Leave

Holidays
Employees who are required to work on a holiday are entitled to twice the regular pay. The national holidays are:

  • Jan. 1: New Year's Day
  • First Monday in February: Constitution Day
  • Third Monday in March: Benito Juarez Day
  • May 1: Labor Day
  • May 5: Anniversary of Battle of Pueblo
  • September 16: Independence Day
  • November 2: Day of the Dead
  • Third Monday in November: Revolution Day
  • Dec. 1 every 6 years (2012, 2018, 2024, etc.): Presidential Inauguration Day
  • Dec. 25: Christmas Day
  • Local and federal election days

Maternity Leave
Women employees can take paid maternity leave for 42 days before the expected delivery date and 42 days subsequently at 100% of regular wages. The leave after the delivery date can be extended by 2 weeks if the child requires hospitalization or has a disability. Women can transfer a maximum of 4 weeks leave before the date of delivery to postpartum leave. In case of adoption, female employees get 6 weeks leave after adopting the child. When they return to work after maternity leave, they can take two 30-minute rest periods in a day for childcare. Employers can help by reducing their shifts by an hour per work day. The maternity leave is funded by the Mexican Social Security Institute (Instituto Mexicano de Seguro Social or IMSS).

Paternity Leave
Male employees are entitled to a maximum of five days of paid leave for the adoption or birth of a child.

Sick Leave
Employees who are unable to work due to injury or illness (not related to work) and have made contributions to the social security system for at least 4 weeks before the condition developed, qualify for paid sick leave from the Social Security Institute. The benefits are paid at 60% of regular wages from the 4th day of the injury or illness up to 52 weeks. This period can be extended by another 52 weeks if required.

Annual/Vacation Leave
Employers are required to provide six paid annual leaves to employees after completing 1 year of employment. The number of leaves increases by 2 days every subsequent year until it reaches 12 after 4 years of employment. After this, annual leave increases by 2 days for every 5 years of service. Employees are entitled to an additional 25% premium if they opt for payment in lieu of vacation.

Benefits

Pensions and Social Security
The legal retirement age is 65. Employees can also choose to retire at 60 years with reduced benefits. All cooperative members and private-sector employees, since 1997, are required to register with the Mexican Institute of Social Security or IMSS. Employees covered by the social insurance system pre-1997 can choose to receive benefits from the same or the individual account system with the IMSS.

Workers' Compensation
Employers must register employees with the IMSS and also pay premiums to provide benefits to employees for work-related injuries and illnesses including surgery, hospitalization, medications, orthotic or prosthetic devices, rehabilitation, indemnities, and pensions.

How GPS can Help

With our Global PEO/Employer of Record services, companies can expand into Mexico and hire their employees without having to establish a branch office or subsidiary in Mexico.

  • Your candidate is hired via our Mexico PEO. If needed, we can also help you find the right talent in any country with our comprehensive global staffing services.
  • Your new employee begins work quickly as we take care of employment contracts, statutory and non-statutory benefits, and running their payroll - all in full compliance with Mexico laws.
  • Global PEO Services experts manage all day-to-day operational issues such as employee expenses, and severance/termination if required.
  • With no contractor risks, pass on the compliance burden to Global PEO Services.

Spin Off/M&A Support

  • Ensure continuity of payroll, benefits and HR support when acquiring or spinning off a business with employees overseas.

24/7 Support in 100+ Countries

  • Empower your teams with 24/7 support and a single point-of-contact model in which experienced client services directors are in continuous communication with information and advice.
  • We are backed by a mix of 300+ multidisciplinary experts from HR, Payroll, Finance, Tax, and Legal domains who are ready to respond to the expected and unexpected needs of your business on the shortest notice.

Easy Visibility into Your Employee Time & Attendance and Benefits Data
With our Global PEO, you get access to Mihi, our proprietary SaaS solution for time and attendance, vacation, leave management and benefits enrollment and managements. Mihi enables clients to have easy access to employee data in real time. It is designed specifically for companies with a global workforce, especially when working in multiple countries with low headcounts.

Ready for Growth When You Are
When ready, we can seamlessly transition you from the PEO/EOR model to your own legal entity and provide ongoing international HR, finance, legal, compliance and staffing support. Lean more about our end-to-end international expansion services.